More legal action to come BOQ’s way

More than 10 former and current Bank of Queensland branch owner-managers are planning to launch a joint legal action against the bank for damages resulting from the under­performance of their businesses, ­according to lawyers.

The NSW-based litigants, who had branches in Sydney and surrounding suburbs, are expected to announce their legal action within a month, and expectations are they will be joined by an equal number from other states.

Three former owner-managers and two lawyers advising other managers have confirmed the pending action to The Australian Financial Review.

At present,
Bank of Queensland
has about 200 owner-manager branches, of which more than 90 per cent are concentrated on the eastern coast: there are roughly 110 in Queensland, 42 in NSW and 26 in Victoria.

According to lawyers who are preparing the cases, the former owner-managers will allege that the bank misled them about what their branches could earn in commissions from selling the bank’s products.

They are also expected to allege that the bank persuaded the owner-managers who did open to continue “when it was increasingly apparent that a large number of the branches that had opened were not achieving results that made their business viable," according to a lawyer involved in the proceedings, who does not wish to be named until the case has been launched.

They will also be seeking forgiveness of loans of up to $400,000 taken out with the bank to meet their obligations to rent, equip and pay for the branch’s fixtures.

The action will be launched as the bank continues to fight two test cases in NSW and Queensland courts brought by former borrowers who used their loans to invest with collapsed adviser Storm Financial.

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It is also awaiting the outcome of another action in the NSW Federal Court brought by former owner-manager Leicester Ramsey, which is now being reviewed after 23 days of court hearings. Mr Ramsey, who was an owner-manager in Campbelltown, NSW, for 12 months, is ­alleging unconscionable conduct and misrepresentation of the bank’s owner-manager terms.

There are six additional cases by former owner-managers that have been running in the NSW courts for between one and three years. The former franchisees owned and operated their businesses at Bondi Junction, Rhodes, Maroubra Junction, Hurtsville, Bathurst and Castlereagh Street in Sydney’s central business district.

Bank of Queensland chief executive
David Liddy
recently defended the owner-manager model, claiming that it had “proved resilient and a more productive distribution channel to address retail and small-to­medium enterprise lending".

The bank said yesterday it had not received any recent litigation claims on behalf of former owner-managers. It said it had made a decision to consolidate branches in NSW for a number of reasons, including the state of the economy and poor selection and performance of some owner-managers

Lawyers said most of the owner-managers bringing the new round of actions had previous experience with major banks before embarking on the franchising businesses. The lawyers claimed that the NSW owner-managers had been told their branches would be turning over $4 million a month “within a relatively short period of time", typically six to 12 months, would be able to meet all ­expenses, including a fixed percentage to the bank, and make a profit.

“We will be arguing that it was an unrealistic financial target and insensible time frame," said a lawyer involved in the case who did not wish to be named until the proceedings are formally announced.

The owner-managers are expected to seek redress under the Trade Practices Act, the Fair Trading Act, the Australian Securities and Investments Commission Act, in addition to actions against unfair contracts under the Industrial Relations Act.